Limited company.....

[v3rob11]

This company i'm buying is currently opperating at a loss, i'm not sure if this is legit or not it doesn't matter really as i know the potential but i wondered if when you buy a limited company does the debts of the business leave with the directors??

Im not hot on limited companies so am struggling to know the ins and outs etc.

Much help would be grateful.

[fredpuli47]

No, the debts are the company's. Always remember that a company is a 'person' in law. It's not the directors, it's not the shareholders, it's itself.

A big problem with buying any company is that you really don't know what the company's debts and liabilities are. You can't tell by looking at the latest accounts. Why not? Partly because accounts are a snapshot of one moment at one past time but mainly because the company may have contracts and any number of other obligations, all of which are or may translate into debts due now or tomorrow, or next year, whenever,but they are all out there. These liabilities won't show on the accounts, and may not be readily detectable either.

If you think that problematic, you are not alone. There have been recent instances of major public companies taking over other big companies, only to discover , too late, that the bought business had vastly greater debts and liabilities (and sometimes far less in assets) than they knew of

[Finance Guy]

I have to agree with fred, although appointing a corporate lawyer to perform 'due diligence' would ease or confirm any worries you may have - thereby giving you more information with which to make a decision about buying this firm.

Good luck

[Twenty20]

I'm not sure I'd 'buy' a company that didnt make money. Take it over possibly, but not purchase it. If it has potential to make money then you'd need to look carefully as to why its not at present.

You'd be taking over the debts too so you must look at the books - costs, overheads, sales etc. If you dont know what youre doing or looking for then employ someone who does.

[HelpfulHarry]

If you are in the process of buying the company, as you say, then carry on. Buying a Limited Conmpany with losses is quite normal because the losses will be off-set against your future profits. Previous replies, while correct, are scare-mongering.

[v3rob11]

thanks to all of you who gave advice. Some of this i didn't know so it's all good. The business is at a loss but is being "milked" far too much in excessive wages plus i have the benefit of previous employment there so i know a little nehind the scenes and the potntial.

[v3rob11]

My solicitor says if I buy the �assets� of the company then all potential debts end when I take over?

[Finance Guy]

Your solicitor sounds smart, take further advice, tread carefully and good luck to you.

My previous answer was not "scaremogering" , just common sense.